Wednesday, June 1, 2022

How to Calculate Shipping Costs for an Online Store

Learn how to calculate shipping costs to save money, increase profits, and maximize your fulfillment potential.

How to calculate shipping costs properly is a skill every e-commerce store owner needs to learn.

If you run an e-commerce company, then you’ll be well versed in paying for shipping. Whether local or international, you simply can’t run an online store without using shipping in one form or another. In fact, with over $1.49 trillion spent on shipping just last year alone, this is continually one of the most common payments that businesses have to deal with.

Considering the size and scope of the shipping market, it’s no wonder that e-commerce stores are now spoiled for choice. From which shipping companies to use to the range of third-party logistics that can help with the process, there are a lot of ways that shipping costs can fluctuate.

In this article, we’ll be exploring exactly how to calculate shipping costs for your business and showing you a range of ways to reduce your final figure. You’ll be shipping more and spending less in no time.

Let’s get right into it!

How to Calculate Shipping Costs and Save Money 

Cutting down on costs is a holistic experience, with business owners having to focus on a range of different areas. Here are just a few of the distinct ways that you can save on shipping costs for your online store:

  • Reduce your package sizes
  • Negotiate the shipping fee with carriers
  • Get flat-rate package insurance
  • Switch to poly mailers
  • Research
  • Work with a 3PL service

Let’s break down these further.

Reduce Your Package Sizes

One of the core metrics a shipping carrier takes into account when calculating how much to charge is the size of the box. If you’ve got a large item, it will take up more space in their shipping vehicles, meaning that they’ll deliver a higher quote.

With that in mind, one of the easiest ways you can reduce your shipping costs is to reduce the size of the packages you’re shipping. Instead of bulky boxes with lots of extra room, you can always create custom packaging that directly fits your products. With this, you’ll be able to ship your products in excellent condition while also delivering a premium service to your customers.

Additionally, if you can ship any of your products in their own container, you’ll further save on shipping costs. This practice is known as SIOC — ships in own container — and will dramatically reduce costs as all you’ll need to do is add a shipping label to the box.

Finally, if you’re filling your box with additional packing materials to keep a fragile item safe, be sure to weigh precisely how heavy those elements are. The difference between paper shreds and polystyrene may not be much, but over several thousand packages, it can really add up.

Always be sure to reduce the size and weight of your boxes whenever you can!

Negotiate With Shipping Companies

One strategy that e-commerce business owners commonly overlook is negotiation. While discussing prices and bulk orders with your supplier may seem natural, few people practice the same strategies with the companies that they use to ship. If you routinely work with a specific shipping company, then there is absolutely nothing stopping you from reaching out to them and asking for a discount.

If you’re a small business only shipping a few parcels each month, this might not be a very likely conversation for you. However, if you send hundreds or even thousands of packages each month, you’ll have more bargaining power. You can propose a discounted rate for favoring that shipping company.

Be sure to shop around, there are so many shipping companies out there that you’re sure to find one that will offer you a fantastic deal. Always compare offers against each other and find one that works for your company. Even a small figure like 5% saved per shipment can add up over time. 

Just think, anything you save on the shipping charge is an active gain for your company, pushing you further into the positive profit margin. 

Get Flat-Rate Packaging Insurance

As an e-commerce business, you’ve already likely had to deal with working out in which circumstances you need shipping insurance. The answer is that in most cases, you’re going to need some level of insurance to protect yourself and the customers’ packages if anything goes missing or is stolen along the way. 

Considering that over 19% of all American customers had at least one package stolen in 2021, the probability is reasonably high that one of your customers will experience this. Due to that, you’ll want to make sure you have shipping insurance. 

However, instead of buying insurance on every parcel individually, you can partner with companies that will cover everything you ship. While this will be a more significant upfront investment, it will protect you completely if anything goes wrong. 

Switch to Poly Mailers

Poly mailers are plastic envelopes that you’ll commonly see delivering any non-fragile items. If you order books online from independent retailers, they often arrive in these bags. Inherently, boxes are larger and bulkier than plastic packages, meaning they take up more space and cost more to ship.

If your e-commerce store ships non-fragile or sturdy items, then using poly mailer bags will save you a great deal of money on shipping, ensuring that you pay less for every single item that you ship. In addition, you can order these in bulk with ease, only needing some tape to wrap up!

What’s more, poly mailers come in all shapes and sizes, meaning you can customize the size you need depending on which of your products you’re shipping out to a customer.

Research

This is probably the most obvious tip on the list, but one that is frequently overlooked by business owners. Asking around, researching, and comparing different shipping services and their prices can really make a difference to the total amount you’ll be paying each month for shipping. 

By comparing the shipping rate for one of your commonly shipped packages with different companies, you can build up a better idea of exactly where you could save the most money. Once you’ve worked on which company is best for you, you can then reach out and ask about additional discounts due to the number of products you’ll be shipping, as stated earlier.

Work With a 3PL Service

By far, the easiest way to save money on your shipping costs every single month is to start working with a third-party logistics service like Selery. Not only does Selery take care of every step of the shipping process, including picking and packaging the products, but we’ve also built up relationships with some of America’s largest shipping companies.

From UPS to FedEx, our partnerships give us access to the lowest shipping rates in the business, allowing you to take advantage of our incredibly low shipping costs to get your packages where they need to be for less.

On top of that, consider that our shipping service covers every aspect of the process. Without you having to spend hours each day packaging your items, you’ll be able to save your time throughout the week. With all these extra hours in the day, you’ll be able to focus on expanding the business or working on your marketing to push your success even further. 

Selery ships tens of thousands of products every single month with our in-house product tracking system, meaning that you’ll know where your items are at every step of the journey. With our e-commerce store integration into sites like Squarespace and Wix, you’ll be able to send us orders directly when they come in, keeping everything running smoothly.

When partnering with a 3PL service like Selery, you’ll be getting the cheapest possible shipping rates while also getting a premier service. All our packages have a 24-hour dispatch window, meaning your customers will get their orders at lightning speed.

If you’re looking to save money on shipping and make the entire process as easy as possible, then Selery is the 3PL service for you.

How to Calculate Shipping Costs for My Online Store?

When trying to accurately calculate how much it costs your business to ship an item, there are several different tiers and possibilities that you could choose. From shipping zones to package weight and delivery time, the number of options available is helpful yet further complicates the math behind this puzzle. 

Let’s go through the three most common ways of calculating shipping costs, covering the methods which are most likely to be offered to your e-commerce business.

  • Free shipping
  • Fixed shipping prices
  • Matrix rate shipping cost

Let's break these down.

Free Shipping

Who doesn’t love free shipping! Most consumers consider free shipping as one of the biggest pulls they have toward buying a product, with costly shipping being a huge dampener on a sale.

If you’re in a position to offer free shipping, then you’ll simply be paying whatever the shipping service you use offers you. There isn’t much to calculate here, so we’ll give you an additional tip.

While a free shipping option is great to offer, it can really cut into profit margins if you don’t watch out. One strategy that e-commerce businesses use to get around this is to offer free shipping after a certain amount. To do this, work out the average order figure for your store. If it’s $50, then offer free shipping on everything over $60, just to push the likelihood of additional products being put into the checkout basket to get to that figure.

Fixed Shipping Prices

Fixed cost shipping is where your customers always pay the same shipping price, no matter what they’ve bought. This is a good strategy if all of your products are a similar size as there won’t be many fluctuations in the average shipping cost. However, if your store offers radically different-sized products, then fixed shipping often isn’t a great choice.

We recommend that you calculate the average box size needed within your store, work out how much that will cost you to ship, and then round the amount up to the nearest dollar to determine a flat rate shipping cost. This gives you a little leeway that will ensure you make money on your small and average orders, and lose less on your largest sized orders.

Matrix Rate Shipping

Calculating matrix or table rate shipping is the most complicated of the shipping practices, as it involves you knowing the shipping zone where the product is going, as well as the weight and shipping cost of that said product.

Matrix rate shipping considers where the person is, what they’ve bought, and how much each of the items will take to ship. Live calculations will then determine how much they will need to pay in shipping. Most of the time, a built-in extension or application on a store will calculate shipping cost, making the math as easy as possible for business owners.

Calculating E-Commerce Shipping Costs

When calculating e-commerce shipping costs, each major shipping carrier will detail its rates on its site. You’ll also be able to find out about any volume shipping discounts that each of the services offers, to help you work out how much everything will cost you.

  • USPS — USPS has a range of different shipping options, allowing you to ship any parcel size. Things you’ll need to know are: the weight of the package, the class of shipping, parcel dimension, and if a nonstandard size fee will apply to the sale. Find their shipping calculator here.
  • UPS — Depending on your location in the USA, the shipping method and delivery time you select, and the current relative demand for shipping, the prices for this service will go up and down. Check out their site for more information and to use their shipping cost calculator.
  • FedEx — FedEx rates their package shipping services from low to high in terms of total shipping cost, allowing you to find the exact band that works for you. This service is very straightforward, with all their details being on their homepage.

If you’re looking to get around shipping calculations and laborious sums, partnering with a 3PL service is always the most convenient option. Get in contact with Selery today for a quote that will streamline the way you ship. 

Why Selery?

  • Same day fulfillment
  • Offer 2-day shipping
  • Account rep